Exhibit 10.20
SERIES 3 WARRANT AGREEMENT dated as of December 30, 1998
between The WMF Group, Ltd., a Delaware corporation (the "Company"), and HN
Acquisitions, Inc., a Florida corporation (hereinafter referred to as "HN").
W I T N E S S E T H:
WHEREAS, WMF Capital Corp., a subsidiary of the Company
("Capital Corp."), issued a certain Credit Lease Loan Commitment dated August 6,
1998, to HN; and
WHEREAS, HN, Xxxxxx Xxxxxxx ("Xxxxxxx"), the Company and
Capital Corp. have entered into a Settlement Agreement whereby HN and Xxxxxxx
have agreed to release the Company and Capital Corp. from liability under the
Credit Lease Loan Commitment; and
WHEREAS, as partial consideration to HN and Xxxxxxx under the
Settlement Agreement, the Company has agreed to issue to HN Series 3 warrants
(the "Warrants") to purchase up to 150,000 shares (the "Shares") of common stock
of the Company, $.01 par value (the "Common Stock");
NOW, THEREFORE, in further consideration for the release by HN
and Xxxxxxx of the Company and Capital Corp., from their obligations to HN under
the Credit Lease Loan Commitment, and in consideration of the premises and
agreements herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. GRANT.
HN (or its designees, as permitted pursuant to the Settlement
Agreement) is hereby granted the right to purchase, at any time from the date
hereof until 5:00 P.M., New York City time, on December 30, 2003 (the "Warrant
Exercise Term"), up to 150,000 Shares at an initial
-1-
exercise price of $10.00 per Share (the "Initial Exercise Price") (subject to
adjustment as provided in SECTION 8 hereof).
2. WARRANT CERTIFICATES.
The warrant certificates (the "Warrant Certificates") delivered and to
be delivered pursuant to this Agreement shall be in the form set forth as
EXHIBIT A, attached hereto and made a part hereof, with such appropriate
insertions, omissions, substitutions and other variations as required or
permitted by this Agreement.
3. CASH EXERCISE OF WARRANTS.
The Warrants initially are exercisable at the Initial Exercise Price,
payable in cash or by check to the order of the Company, or any combination of
cash or check, subject to adjustment as provided in SECTION 8 hereof. Upon
surrender of the Warrant Certificate with the annexed Form of Election to
Purchase duly executed, together with payment of the Exercise Price (as
hereinafter defined) for the Shares purchased, at the Company's principal
offices (presently located at 0000 Xxxxxx Xxxx Xxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx
00000) the registered holder of a Warrant Certificate ("Holder" or "Holders")
shall be entitled to receive a certificate or certificates for the Shares so
purchased. The purchase rights represented by each Warrant Certificate are
exercisable at the option of the Holder thereof, in whole or in part (but not as
to fractional shares of the Common Stock). In the case of the purchase of less
than all the Shares purchasable under any Warrant Certificate, the Company shall
cancel said Warrant Certificate upon the surrender thereof and shall execute and
deliver a new Warrant Certificate of like tenor for the balance of the Shares
purchasable thereunder.
-2-
4. CASHLESS EXERCISE OF WARRANTS.
At any time during the Warrant Exercise Term, the Holder may, at its
option, exchange the Warrant, in whole or in part, into the number of Shares
determined in accordance with this SECTION 4 (a "Warrant Exchange"), by
surrendering this Warrant at the principal office of the Company or at the
office of its transfer agent, accompanied by a notice stating such Holder's
intent to effect such exchange, the number of Shares to be exchanged and the
date on which the Holder requests that such Warrant Exchange occur (the "Notice
of Exchange"). The Warrant Exchange shall take place on the date specified in
the Notice of Exchange or, if later, the date the Notice of Exchange is received
by the Company (the "Exchange Date"). Certificates for the Shares issuable upon
such Warrant Exchange and, if applicable, a new warrant of like tenor evidencing
the balance of the Shares remaining subject to this Warrant, shall be issued as
of the Exchange Date and delivered to the Holder within five (5) business days
following the Exchange Date. In connection with any Warrant Exchange, this
Warrant shall represent the right to subscribe for and acquire the number of
Shares (rounded to the next highest integer) equal to (i) the number of Shares
specified by the Holder in its Notice of Exchange (the "Total Number") less (ii)
the number of Shares equal to the quotient obtained by dividing (A) the product
of the Total Number and the existing Exercise Price (as hereinafter defined) by
(B) the current Market Price of one share of Common Stock.
5. ISSUANCE OF CERTIFICATES.
Upon the exercise of the Warrants, the issuance of certificates for the
Shares shall be made forthwith (and in any event within five (5) business days
thereafter) without charge to the Holder
-3-
thereof including, without limitation, any tax which may be payable in respect
of the issuance thereof, and such certificates shall be issued in the name of,
or, if the requirements of SECTION 7 hereof have been satisfied, in such names
as may be directed by, the Holder thereof; PROVIDED, HOWEVER, that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any such certificates in a
name other than that of the Holder, and the Company shall not be required to
issue or deliver such certificates unless and until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
The Warrant Certificates and the certificates representing the Shares
shall be executed on behalf of the Company by the manual or facsimile signature
of the present or any future Chairman or Vice Chairman of the Board of Directors
or President or a Vice President of the Company, attested to by the manual or
facsimile signature of the present or any future Treasurer or an Assistant
Treasurer or Secretary or an Assistant Secretary of the Company. Warrant
Certificates shall be dated the date of execution by the Company upon initial
issuance, division, exchange, substitution or transfer.
The Warrant Certificates and, upon exercise of the Warrants, in part or
in whole, certificates representing the Shares shall bear a legend substantially
similar to the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act") or
applicable state securities laws, and may not be offered or sold except
(i) pursuant to an effective registration statement under the Act or
such laws, (ii) to the extent applicable, pursuant to Rule 144 under
the Act (or any similar rule under the Act relating to the disposition
of securities), or (iii) upon the delivery by the holder to the Company
-4-
of an opinion of counsel, reasonably satisfactory to counsel to the
Company, stating that an exemption from registration under the Act is
available."
6. PRICE.
6.1 INITIAL AND ADJUSTED EXERCISE PRICE.
The initial exercise price of each Warrant shall be the Initial
Exercise Price set forth in SECTION 1. The adjusted exercise price shall be the
price which shall result from time to time from any and all adjustments of the
Initial Exercise Price in accordance with the provisions of SECTION 8 hereof.
6.2 EXERCISE PRICE.
The term "Exercise Price" herein shall mean the Initial Exercise Price
or the adjusted exercise price, depending upon the context.
7. REGISTRATION RIGHTS; LIMITATIONS ON TRANSFER.
The Warrants and the Shares have not been registered for purposes of
public distribution under the Securities Act of 1933, as amended ("the Act") or
applicable state securities laws and may not be offered, sold or otherwise
transferred except (i) pursuant to an effective registration statement under the
Act or such laws, (ii) to the extent applicable, pursuant to Rule 144 under the
Act (or any similar rule under the Act relating to the disposition of
securities), or (iii) upon the delivery by the holder to the Company of an
opinion of counsel, reasonably satisfactory to counsel to the Company, stating
that exemptions from registration under the Act and such laws are available. The
Shares shall be registered under the Act pursuant to the terms and conditions of
the Registration Rights Agreement, of even date herewith, by and between HN and
the Company.
-5-
8. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF SHARES.
8.1 ADJUSTMENT OF NUMBER OF SHARES PURCHASABLE.
Upon any adjustment of the Exercise Price as provided in SECTION 8.2,
the holder hereof shall thereafter be entitled to purchase, at the Exercise
Price resulting from such adjustment, the number of shares of Common Stock
(calculated to the nearest full share) obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Common Stock purchasable hereunder immediately prior to such adjustment and
dividing the product thereof by the Exercise Price resulting from such
adjustment.
8.2 ADJUSTMENT OF EXERCISE PRICE.
The Exercise Price shall be subject to adjustment from time to time as
hereinafter set forth.
(a) STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS.
In the event that the Company after the date hereof shall:
(1) declare a dividend upon, or make any
distribution in respect of, any of its stock, payable
in Common Stock, securities convertible or
exchangeable into Common Stock ("Convertible
Securities") or options, rights or warrants to
purchase Common Stock ("Stock Purchase Rights"), or
(2) subdivide its outstanding shares of
Common Stock into a larger number of shares of Common
Stock, or
(3) combine its outstanding shares of
Common Stock into a smaller number of shares of
Common Stock,
-6-
then the Exercise Price shall be adjusted to that price determined by
multiplying the Exercise Price immediately prior to such event by a fraction (A)
the numerator of which shall be the total number of outstanding shares of Common
Stock of the Company immediately prior to such event, and (B) the denominator of
which shall be the total number of outstanding shares of Common Stock of the
Company immediately after such event, treating as outstanding all shares of
Common Stock issuable upon conversions or exchanges of the Convertible
Securities and exercises of the Stock Purchase Rights referred to in SECTION
8.2(a)(1).
(b) ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In
case the Company shall issue or sell any shares of Common
Stock after the Closing Date for a consideration less than the
Market Price (as defined below) per share on the date
immediately prior to such issuance, the Exercise Price upon
each such issuance or sale shall be adjusted (to the nearest
full cent) to the price calculated by MULTIPLYING the then
existing Exercise Price by a fraction the numerator of which
is (A) the sum of (1) the number of shares of Common Stock
outstanding immediately prior to such issue or sale multiplied
by the Market Price per share of Common Stock on the date
immediately prior to such issue or sale PLUS (2) the
consideration received by the Company upon such issue or sale,
divided by (B) the total number of shares of Common Stock
outstanding immediately after such issue or sale, and the
denominator of which shall be the Market Price per share of
Common Stock on the date immediately prior to such issue or
sale.
For purposes of this SECTION 8.2(b) the adjustment shall be made
successively whenever any issuance is made, and shall become effective
immediately after such issuance.
-7-
The provisions of this SECTION 8.2(b) shall not apply to any additional
shares of Common Stock which are distributed to holders of Common Stock pursuant
to a stock dividend or subdivision for which an adjustment is provided for under
SECTION 8.2(a). No adjustment of the Exercise Price shall be made under this
SECTION 8.2(b) upon the issuance of any additional shares of Common Stock which
are issued pursuant to the exercise of any Stock Purchase Rights or pursuant to
the conversion or exchange of any Convertible Securities to the extent that such
adjustment shall previously have been made upon the issuance of such Stock
Purchase Rights or Convertible Securities pursuant to subsection (a), (c) or (d)
of this SECTION 8.2.
Further, the provisions of this SECTION 8.2(b) shall not apply if:
(i) the Company issues stock to third parties in an
arms-length transaction for cash or other consideration having a value
equal to at least (A) 85 percent (85%) of the Market Price on the date
of the issuance of such stock or, if the offering is priced prior to
the closing of the applicable market for the Common Stock on such date,
the trading day immediately preceding such date, or (B) 90 percent
(90%) of the average of the Market Prices of the Common Stock for the
ten (10) consecutive trading days ending on the date of the issuance of
such stock, including but not limited to, stock issuances pursuant to a
merger, consolidation, corporate reorganization (both taxable and
nontaxable), corporate restructuring, or private placement or;
(ii) the Company issues shares of Common Stock to individuals
or entities upon the exercise or conversion of Convertible Securities
or Stock Purchase Rights outstanding on the date hereof, or pursuant to
Stock Purchase Rights issued pursuant to
-8-
the rights offering first announced publicly on or about October 21,
1998 (the "Company Rights Offering") or pursuant to any stand-by
purchase commitment relating to the Company Rights Offering; or
(iii) the Company issues warrants, rights, options or
restricted stock to employees of the Company or its affiliates pursuant
to a deferred compensation plan, key employee incentive plan or another
applicable employment compensation plan so long as the exercise price
for any such warrants, rights or options is equal to or greater than
either (A) the Market Price on the date of the issuance of such
warrants, rights or options, or (B) the average Market Prices for the
ten (10) consecutive trading days ending on the date of the issuance of
such warrants, rights or options.
As used in this Agreement, the phrase "Market Price" at any date shall
be deemed to be the last reported sale price, or, in case no such reported sale
takes place on such day, the average of the last reported sale prices for the
last three trading days, in either case as officially reported by the principal
securities exchange on which the Common Stock is listed or admitted to trading
or as reported in the Nasdaq National Market System, or, if the Common Stock is
not listed or admitted to trading on any national securities exchange or quoted
on the Nasdaq National Market System, the closing bid price as furnished by the
National Association of Securities Dealers, Inc. through Nasdaq or similar
organization if Nasdaq is no longer reporting such information, or if the Common
Stock is not quoted on Nasdaq, as determined in good faith by resolution of the
Board of Directors of the Company based on the best information available to it.
(c) ISSUANCE OF STOCK PURCHASE RIGHTS. In case the
Company shall issue or sell any Stock Purchase Rights and the
consideration per share for which
-9-
additional shares of Common Stock may at any time thereafter
be issuable upon exercise thereof (or, in the case of Stock
Purchase Rights exercisable for the purchase of Convertible
Securities, upon the subsequent conversion or exchange of such
Convertible Securities) shall be less than the then Market
Price per share, the Exercise Price shall be adjusted as
provided in SECTION 8.2(b) on the basis that (I) the maximum
number of additional shares of Common Stock issuable upon
exercise of such Stock Purchase Rights (or upon conversion or
exchange of such Convertible Securities following such
exercise) shall be deemed to have been issued as of the date
of the determination of the Market Price, as hereinafter
provided, and (II) the aggregate consideration received for
such additional shares of Common Stock shall be deemed to be
the minimum consideration received and receivable by the
Company in connection with the issuance and exercise of such
Stock Purchase Rights (or upon conversion or exchange of such
Convertible Securities). For the purposes of this SECTION
8.2(c), the date as of which the Market Price shall be
determined shall be the earlier of (A) the date on which the
Company shall enter into a firm contract for the issuance of
such Stock Purchase Rights, or (B) the date of actual issuance
of such Stock Purchase Rights. The provisions of this SECTION
8.2(c) shall not apply to Stock Purchase Rights issued in
connection with the Company Rights Offering.
(d) ISSUANCE OF CONVERTIBLE SECURITIES. In case the
Company shall issue or sell any Convertible Securities and the
consideration per share for which additional shares of Common
Stock may at any time thereafter be issuable
-10-
pursuant to the terms of such Convertible Securities shall be
less than the then Market Price per share, the Exercise Price
shall be adjusted as provided in SECTION 8.2(b) on the basis
that (I) the maximum number of additional shares of Common
Stock necessary to effect the conversion or exchange of all
such Convertible Securities shall be deemed to have been
issued as of the date for the determination of the Market
Price, as hereinafter provided, and (II) the aggregate
consideration received for such additional shares of Common
Stock shall be deemed to be equal to the minimum consideration
received and receivable by the Company in connection with the
issuance and exercise of such Convertible Securities. For the
purposes of this SECTION 8.2(d), the date as of which the
Market Price per share shall be determined shall be the
earlier of (A) the date on which the Company shall enter into
a firm contract for the issuance of such Convertible
Securities, or (B) the date of actual issuance of such
Convertible Securities. No adjustment of the Exercise Price
shall be made under this SECTION 8.2(d) upon the issuance of
any Convertible Securities which are issued pursuant to the
exercise of any Stock Purchase Rights, if an adjustment shall
previously have been made upon the issuance of such Stock
Purchase Rights pursuant to SECTION 8.2(c).
(e) MINIMUM ADJUSTMENT. In the event any adjustment
of the Exercise Price pursuant to this SECTION 8.2 shall
result in an adjustment of less than $.02 per share of Common
Stock, no such adjustment shall be made, but any such lesser
adjustment shall be carried forward and shall be made at the
time and together with the next subsequent adjustment, if any,
which, together with any adjustments so
-11-
carried forward, shall amount to $.02 more per share of Common
Stock; PROVIDED, HOWEVER, that upon any adjustment of the
Exercise Price resulting from (i) the declaration of a
dividend upon, or the making of any distribution in respect
of, any stock of the Company payable in Common Stock or
Convertible Securities or (ii) the reclassification by
subdivision, combination or otherwise, of the Common Stock
into a greater or smaller number of shares, the foregoing
figure of $.02 per share (or such figure as last adjusted)
shall be proportionately adjusted.
(f) READJUSTMENT OF EXERCISE PRICE. In the event (i)
the purchase price payable for any Stock Purchase Rights or
Convertible Securities referred to in subsection (c) or (d)
above, (ii) the additional consideration, if any, payable upon
exercise of such Stock Purchase Rights or upon the conversion
or exchange of such Convertible Securities or (iii) the rate
at which any Convertible Securities referred to above are
convertible into or exchangeable for additional shares of
Common Stock shall change, the Exercise Price in effect at the
time of such event shall forthwith be readjusted to the
Exercise Price which would have been in effect at such time
had such Stock Purchase Rights or Convertible Securities
provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold. On the expiration of
any such Stock Purchase Rights or of any such right to convert
or exchange under any such Convertible Securities, if none of
such Stock Purchase Rights or such Convertible Securities, as
the case may be, shall have been exercised, the Exercise Price
then in effect hereunder shall forthwith be increased to the
Exercise Price
-12-
which would have been in effect at the time of such expiration
or termination had such Stock Purchase Rights or Convertible
Securities never been issued. No readjustment of the Exercise
Price pursuant to this SECTION 8.2(f) shall have the effect of
increasing the Exercise Price by an amount in excess of the
adjustment originally made to the Exercise Price in respect of
the issue, sale or grant of the applicable Stock Purchase
Rights or Convertible Securities.
(g) REORGANIZATION, RECLASSIFICATION OR
RECAPITALIZATION OF COMPANY. In case of any capital
reorganization or reclassification or recapitalization of the
capital stock of the Company (other than in the cases referred
to in SECTION 8.2(a)), or in case of the consolidation or
merger of the Company with or into another corporation, or in
case of the sale or transfer of the property of the Company as
an entirety or substantially as an entirety, there shall
thereafter be deliverable upon the exercise of any Warrant or
any portion thereof (in lieu of or in addition to the number
of shares of Common Stock theretofore deliverable, as
appropriate) the number of shares of stock or other securities
or property to which the holder of the number of shares of
Common Stock which would otherwise have been deliverable upon
the exercise of any Warrant or any portion thereof at the time
would have been entitled upon such capital reorganization or
reclassification of capital stock, consolidation, merger or
sale, and at the same aggregate Exercise Price.
Prior to and as a condition of the consummation of any transaction
described in the preceding sentence, the Company shall make equitable, written
adjustments in the application of the provisions herein set forth satisfactory
to the holder or holders of a majority of the Warrants,
-13-
so that the provisions set forth herein shall thereafter be applicable, as
nearly as possible, in relation to any shares of stock or other securities or
other property thereafter deliverable upon exercise of any Warrant. Any such
adjustment shall be made by and set forth in a supplemental agreement between
the Company and/or the successor entity, as applicable, which agreement shall
bind each such entity, shall be accompanied by an opinion of counsel as to the
enforceability of such agreement and shall be approved by the holder or the
holders of a majority of the Warrants.
(h) OTHER DILUTIVE EVENTS. In case any Distribution
shall occur as to which the other provisions of this SECTION 8
are not strictly applicable but the failure to make any
adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential
intent and principles hereof, then, in each such case, the
Board of Directors of the Company shall determine the amount
of the adjustment in good faith and on a basis consistent with
the essential intent and principles established in this
SECTION 8, necessary to preserve, without dilution, the
purchase rights represented by this Warrant. Upon
determination of such adjustment, the Company will promptly
mail a copy thereof to the holder of this Warrant and shall
make the adjustment described therein.
(i) DETERMINATION OF CONSIDERATION. For purposes of
this SECTION 8, the consideration received or receivable by
the Company for the issuance, sale, grant or assumption of
additional shares of Common Stock, Stock Purchase Rights or
Convertible Securities, irrespective of the accounting
treatment of such consideration, shall be valued as follows:
(1) CASH PAYMENT. In the case of cash, the
net amount received
-14-
by the Company without deduction of any expenses paid
or incurred or any underwriting commissions or
concessions paid or allowed by the Company.
(2) SECURITIES OR OTHER PROPERTY. In the
case of securities or other property, at the Market
Price of the security or the fair value of such other
property as determined in good faith by the Board of
Directors of the Company (in both cases as of the
date immediately preceding the issuance, sale or
grant in question).
(3) ALLOCATION RELATED TO COMMON STOCK. In
the event additional shares of Common Stock are
issued or sold together with other securities or
other assets of the Company for a consideration which
covers both, the consideration received (computed as
provided in (1) and (2) above) shall be allocable to
such additional shares of Common Stock as determined
in good faith by the Board of Directors of the
Company.
(4) DIVIDENDS IN SECURITIES. In case the
Company shall declare a dividend or make any other
distribution upon any stock of the Company (other
than Common Stock) payable in either case in Common
Stock, Convertible Securities or Stock Purchase
Rights, such Common Stock, Convertible Securities or
Stock Purchase Rights, as the case may be, issuable
in payment of such dividend or distribution shall be
deemed to have been issued or sold without
consideration.
(5) STOCK PURCHASE RIGHTS AND CONVERTIBLE
SECURITIES. The
-15-
consideration for which shares of Common Stock shall
be deemed to be issued upon the issuance of any Stock
Purchase Rights or Convertible Securities shall be
determined by dividing (i) the total consideration,
if any, received or receivable by the Company as
consideration for the granting of such Stock Purchase
Rights or the issuance of such Convertible
Securities, plus the minimum aggregate amount of
additional consideration payable to the Company upon
the exercise of such Stock Purchase Rights, or, in
the case of such Convertible Securities, the minimum
aggregate amount of additional consideration, if any,
payable upon the conversion or exchange thereof, in
each case after deducting any accrued interest,
dividends, or any expenses paid or incurred or any
underwriting commissions or concessions paid or
allowed by the Company, by (ii) the maximum number of
shares of Common Stock issuable upon the exercise of
such Stock Purchase Rights or upon the conversion or
exchange of all such Convertible Securities.
(6) MERGER, CONSOLIDATION OR SALE OF
ASSETS. In case any shares of Common Stock or
Convertible Securities or any Stock Purchase Rights
shall be issued in connection with any merger or
consolidation in which the Company is the surviving
corporation, the amount of consideration therefor
shall be deemed to be the fair value of such portion
of the assets and business of the nonsurviving
corporation as shall be attributable to such Common
Stock, Convertible Securities or Stock Purchase
Rights, as the case may be. In the event of any
merger or consolidation of the Company
-16-
in which the Company is not the surviving corporation
or in the event of any sale of all or substantially
all of the assets of the Company for stock or other
securities of any corporation, the Company shall be
deemed to have issued a number of shares of its
Common Stock for stock or securities of the other
corporation computed on the basis of the actual
exchange ratio on which the transaction was
predicated and for a consideration equal to the
Market Price on the date of such transaction of such
stock or securities of the other corporation, and if
any such calculation results in adjustment of the
Exercise Price, the determination of the number of
shares of Common Stock issuable upon exercise of this
Warrant immediately prior to such merger,
consolidation or sale, for the purposes of SECTION
8.2(g) above, shall be made after giving effect to
such adjustment of the Exercise Price.
(j) RECORD DATE. In case the Company shall take a
record of the holders of the Common Stock for the purpose of
entitling them (i) to receive a distribution payable in Common
Stock, Stock Purchase Rights or in Convertible Securities or
(ii) to subscribe for or purchase Common Stock or Convertible
Securities, then all references in this SECTION 8 to the date
of the issue or sale of the shares of Common Stock deemed to
have been issued or sold upon the making of such distribution
or the date of the granting of such right of subscription or
purchase, as the case may be, shall be deemed to be references
to such record date.
(k) SHARES OUTSTANDING. The number of shares of
Common Stock deemed to be outstanding at any given time shall
exclude shares of Common Stock
-17-
in the treasury of the Company and those held by any
subsidiary of the Company.
(l) MAXIMUM EXERCISE PRICE. At no time shall the
Exercise Price per share of Common Stock exceed the amount set
forth in SECTION 1 of this Agreement except as provided in
subsection (a) or (g) of this SECTION 8.2.
(m) APPLICATION. Except as otherwise provided herein,
all subsections of this SECTION 8.2 are intended to operate
independently of one another. If an event occurs that requires
the application of more than one subsection, all applicable
subsections shall be given independent effect.
8.3 CERTIFICATES AND NOTICES.
(a) ADJUSTMENTS TO EXERCISE PRICE. Upon any
adjustment under this SECTION 8 of the number of shares of
Common Stock purchasable upon exercise of a Warrant or of the
Exercise Price, a certificate, signed (i) by the President or
a Vice President and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the
Company, or (ii) by any independent firm of certified public
accountants of recognized national standing selected by, and
at the expense of, the Company, setting forth in reasonable
detail the events requiring the adjustment and the method by
which such adjustment was calculated, shall be mailed to the
holders of the Warrant specifying the adjusted Exercise Price
and the number of shares of Common Stock purchasable upon
exercise of such holder's Warrant after giving effect to such
adjustment.
The certificate of any independent firm of certified public accountants
of recognized national standing selected by the Board of Directors of the
Company shall be conclusive evidence
-18-
of the correctness of any computation made under this SECTION 8.
(b) EFFECT OF FAILURE.
Failure to file any certificate or notice or
to mail any notice or any defect in any certificate or notice
pursuant to this SECTION 8.3 shall not affect the legality or
validity of the adjustment of the Exercise Price or the number
of shares purchasable upon exercise of any Warrant, or any
transaction giving rise thereto.
9. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES.
Each Warrant Certificate is exchangeable without expense, upon
the surrender hereof by the registered Holder at the principal executive office
of the Company, for a new Warrant Certificate of like tenor and date
representing in the aggregate the right to purchase the same number of Shares in
such denominations as shall be designated by the Holder thereof at the time of
such surrender.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Warrant Certificate, if mutilated, the Company will make and deliver a new
Warrant Certificate of like tenor, in lieu thereof.
10. ELIMINATION OF FRACTIONAL INTERESTS.
The Company shall not be required to issue certificates
representing fractions of shares of Common Stock and shall not be required to
issue scrip or pay cash in lieu of fractional
-19-
interests, it being the intent of the parties that all fractional interests
shall be eliminated by rounding any fraction up to the nearest whole number of
shares of Common Stock.
11. RESERVATION AND LISTING OF SECURITIES.
The Company shall at all times reserve and keep available out
of its authorized shares of Common Stock, solely for the purpose of issuance
upon the exercise of the Warrants, such number of shares of Common Stock as
shall be issuable upon the exercise thereof. The Company covenants and agrees
that, upon exercise of the Warrants and payment of the Exercise Price therefor,
all shares of Common Stock issuable upon such exercise shall be duly and validly
issued, fully paid, non-assessable and not subject to the preemptive rights of
any shareholder. As long as the Warrants shall be outstanding, the Company shall
cause all shares of Common Stock issuable upon the exercise of the Warrants to
be listed on or quoted by Nasdaq or listed on such national securities exchanges
as the Company's Common Stock is then listed or quoted, if any.
12. NOTICES TO WARRANT HOLDERS.
Nothing contained in this Agreement shall be construed as
conferring upon the Holder or Holders the right to vote or to consent or to
receive notice as a shareholder in respect of any meetings of shareholders for
the election of directors or any other matter, or as having any rights
whatsoever as a shareholder of the Company. If, however, at any time prior to
the expiration of the Warrants and their exercise, any of the following events
shall occur:
(a) the Company shall take a record of the holders of
its shares of Common Stock for the purpose of entitling them
to receive a dividend or distribution payable otherwise than
in cash, or a cash dividend or distribution payable otherwise
than out of current or retained earnings, as indicated by the
-20-
accounting treatment of such dividend or distribution on the
books of the Company; or
(b) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of the
Company or securities convertible into or exchangeable for
shares of capital stock of the Company, or any option, right
or warrant to subscribe therefor; or
(c) a merger or consolidation involving the Company
or subsidiary of the Company and any other entity and the
Company is not the surviving entity; or
(d) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation or
merger) or a sale of all or substantially all of its property,
assets and business as an entirety shall be proposed; then, in
any one or more of said events, the Company shall give written
notice of such event at least fifteen (15) days prior to the
date fixed as a record date or the date of closing the
transfer books for the determination of the shareholders
entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, options or
warrants, or entitled to vote on such proposed merger,
consolidation, dissolution, liquidation, winding up or sale.
Such notice shall specify such record date or the date of
closing the transfer books, as the case may be. Failure to
give such notice or any defect therein shall not affect the
validity of any action taken in connection with the
declaration or payment of any such dividend or distribution,
or the issuance of any convertible or exchangeable securities
or subscription rights, options or warrants, or any proposed
merger, consolidation, dissolution,
-21-
liquidation, winding up or sale.
13. NOTICES.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly made when delivered,
or mailed by registered or certified mail, return receipt requested:
(a) If to a registered Holder of the Warrants, to the
address of such Holder as shown on the books of the Company;
or
(b) If to the Company, to the address set forth in
SECTION 3 of this Agreement or to such other address as the
Company may designate by notice to the Holders.
14. SUPPLEMENTS AND AMENDMENTS.
The Company and HN may from time to time supplement or amend this
Agreement without the approval of any Holders of Warrant Certificates in order
to cure any ambiguity, to correct or supplement any provision contained herein
which may be defective or inconsistent with any provisions herein, or to make
any other provisions in regard to matters or questions arising hereunder which
the Company and HN may deem necessary or desirable and which the Company and XX
xxxx not to adversely affect the interests of the Holders of Warrant
Certificates.
15. SUCCESSORS.
All the covenants and provisions of this Agreement by or for the
benefit of the Company and the Holders inure to the benefit of their respective
successors and assigns hereunder.
-22-
16. TERMINATION.
This Agreement shall terminate at the close of business on December 30,
2003. Notwithstanding the foregoing, this Agreement will terminate on any
earlier date when all Warrants have been exercised and all the Shares issuable
upon exercise of the Warrants have been resold to the public.
17. GOVERNING LAW.
This Agreement and each Warrant Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of New York and for all
purposes shall be construed in accordance with the laws of said State.
18. BENEFITS OF THIS AGREEMENT.
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company and HN and any other registered Holder or
Holders of the Warrant Certificates, Warrants or the Shares any legal or
equitable right, remedy or claim under this Agreement; and this Agreement shall
be for the sole and exclusive benefit of the Company and HN and any other Holder
or Holders of the Warrant Certificates, Warrants or the Shares.
19. COUNTERPARTS.
This Agreement may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and
such counterparts shall together constitute but one and the same instrument.
-23-
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
[SEAL] THE WMF GROUP, LTD.
By: /S/ XXXXXX XXXXXXXXXX
------------------------------
Name: Xxxxxx Xxxxxxxxxx
Title: President and Chief
Executive Officer
Attest:
/S/ XXXXXXX XXXXXXX
-----------------------
HN ACQUISITIONS, INC.
By: /S/ XXXXXX XXXXXXX
------------------------------
Name: Xxxxxx Xxxxxxx
Title: President
-24-
EXHIBIT A
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT") OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE
OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT OR SUCH LAWS, (ii) TO THE EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER
SUCH ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION OF
SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO THE COMPANY OF AN
OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, STATING
THAT EXEMPTIONS FROM REGISTRATION UNDER THE ACT AND SUCH LAWS ARE AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, DECEMBER 30, 2003
No. W3- _______ Series 3 Warrants
SERIES 3 WARRANT CERTIFICATE
This Warrant Certificate certifies that _______________
____________ or registered assigns, is the registered holder of _______ Series 3
Warrants to purchase, at any time from December 30, 1998 until 5:00 P.M. New
York City time on December 30, 2003 ("Expiration Date"), up to _____ shares
("Shares") of fully-paid and non-assessable common stock, $.01 par value
("Common Stock"), of The WMF Group, Ltd., a Delaware corporation (the
"Company"), at an initial exercise price per share of $10.00, subject to
adjustment in certain events (the "Exercise Price"), upon surrender of this
Warrant Certificate and payment of the Exercise Price at an office or agency of
the Company, but subject to the conditions set forth herein and in the Warrant
Agreement, dated as of December 30, 1998, between the Company and HN
Acquisitions, Inc. (the "Series 3 Warrant Agreement"). Payment of the Exercise
Price may be made in cash, or by certified or official bank check in New York
Clearing House funds payable to the order of the Company, or any combination of
cash or check, or by cashless exercise as provided in the Warrant Agreement.
No Warrant may be exercised after 5:00 P.M., New York City
time, on the Expiration Date, at which time all Warrants evidenced hereby,
unless exercised prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to in a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Company and the holders (the words "holders" or "holder" meaning the registered
holders or registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of
certain events, the Exercise Price and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax or
other governmental charge imposed in connection therewith.
Upon the exercise of less than all of the Warrants evidenced
by this Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined
in the Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated: ___________, THE WMF GROUP, LTD.
[SEAL] By:________________________
Name:
Title:
Attest:
_______________________
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase _________ Shares and
herewith tenders in payment for such Shares cash or a certified or official bank
check payable in New York Clearing House Funds to the order of The WMF Group,
Ltd. in the amount of $ , all in accordance with the terms hereof. The
undersigned requests that a certificate for such Shares be registered in the
name of , whose address is __________________, and that such Certificate be
delivered to __________________, whose address is _____________.
Dated: Signature:_________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate.)
________________________________
________________________________
(Insert Social Security or Other
Identifying Number of Holder)
Signature Guaranteed:
_______________________________
By:____________________________
Title:
The signature to this document must be guaranteed by a member of the Securities
Transfer Agents Medallion program. Notarized or witnessed signatures are not
acceptable.
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ____________________________________________________
hereby sells, assigns and transfers unto
________________________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______________, Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: Signature:__________________________
Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate)
_________________________________
_________________________________
(Insert Social Security or Other
Identifying Number of Assignee)
Signature Guaranteed:
______________________________________
By:___________________________________
Title:
The signature to this document must be guaranteed by a member of the Securities
Transfer Agents Medallion program. Notarized or witnessed signatures are not
acceptable.
